31.05.2021

  • Income transferred to the general results accounts in Turkey by providing from the construction, repair, installation works and technical services performed abroad as per Article 5/h of the Corporate Tax Law, is exempted from corporate tax without any conditions.

In terms of the implementation of this exemption, there is no obligation to bring the income obtained from construction, repair, installation works and technical services performed abroad to Turkey. It is sufficient for the said income to be transferred to the general results accounts in Turkey to benefit from the exemption.

What is the status of the interest and foreign exchange differences paid after the completion of the work due to the construction works carried out abroad, against the tax laws?

  • For loans taken to be used in construction works performed abroad; if there is no business in the foreign country to pay the interest and exchange rate differences to be paid after the completion of the construction works, and the part of the revenue obtained in relation to this work is brought to Turkey in the amount of the loan spent on the construction abroad, the said loans become a debt of the headquarter in Turkey and they must be paid by the headquarter. Foreign exchange differences and interests arising after the completion of the construction works performed abroad related to these loans can be taken into account in the determination of the corporate income within the framework of general principles, since they are an expense for the acquisition and maintenance of commercial income for the central institution.

How will the current accounts be valued between the head office and the branch due to the construction works performed abroad?

  • Regarding construction works performed abroad; in the relations between the headquarters in Turkey and the workplace abroad, goods and services movements made by issuing invoices from Turkey to a workplace abroad and accepted as a cost or expense in that workplace, and money movements between the workplace abroad and the head office in Turkey must be followed in separate accounts and the valuation must be made accordingly.

Receivables and payables in foreign currency arising from the goods exported by issuing an invoice to the workplace abroad and the services rendered by issuing invoices for abroad will be subject to valuation in the same way as receivables and payables arising from the export of goods or services, and the valuation differences will be taken into account in determining the tax base.

It is clear that the receivables and payables arising from other money movements between the head office in Turkey and the workplace abroad do not have the characteristics of a real receivable or debt. Therefore, valuation of current account balances based on said money movements is not required.

Source: Revenue Administration of Turkey – Translated by: Karen Audit
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